Saturday, November 15, 2008

The fate of the "Big Three"

I know this isn't as cute as looking at parker but I'm looking for a little help; I'm undecided on the merits of saving the American auto industry. As congress debates about what to do I wonder myself the best action to take.

Here are some reasons I have heard in support or opposition of the bailout of the big three. I don't necessarily agree with them but they are being said.

Support it reasons
- 3 million jobs could be on the line
- They could be rebuilt into green companies and bring new jobs
- Support millions of people who survive off the company’s pension funds
- "It's to big to fail" - they are backbone to American manufacturing economy
- "Ok they might have seen this coming but nobody thought the economy would blow up like it has"
- Do we really want to be completely dependent on other countries for our cars?
Oppose it reasons
- Its Protectionist, its biased against foreign companies who build cars here
- Should companies who can't compete stay in business on government life support?
- This will continue the snow ball with industries going to the government for money
- These companies are filled with overspending and inefficiencies
- They are struggling for cash yet spending millions lobbying congress for a bailout

The value of GM is now under 2 billion, down from nearly 56 billion in 2000. Lehman Brothers was once worth nearly 47 billion but missed the lifeline by the government. AIG was deemed "to big to fail" because of it's broad reaching business.

Even though the asset value of GM has been completely erased the big three (GM, Ford, Chrysler) combined still influence nearly 3 million jobs. The loss of which would clearly drag the us economy into a very prolonged recovery. Adding to the 1.2 million jobs lost already the last 10 months.

It is much more complicated in real life but I generally believe negative growth is a recession and massive unemployment is a depression. While I believe the loss of the big three makes more economic sense to make room for something better, I can't help but wonder if letting it go starts a point of "no return". I look at different economic models all day but there has to be more to this than the numbers.

Anybody else have any ideas? I'm all ears...


Larry and Karri said...

Obviously I'm no expert on the subject but I think that bailing out these companies is like putting a bandaid on the problem. It might help in the short-term but I don't know that it's going to have a positive impact long-term as there are so many other problems with the economy right now. I think it's probably going to take several years for our economic issues to resolve and start heading upwards again.

Whenever I think about this issue I can't help but think of how different this all is from the great depression. We're so afraid of what will happen if these companies fail, but in reality America has been through tough times like this before and over time has been able to recover. It was times like this that made people become more resourceful than ever and see the value of saving money and storing food.

I remember a while back that President Hinckley said something like "The current level of prosperity cannot continue forever...", so I'm not surprised to see what's happening. I do take some small comfort in what we've been able to set aside for food storage and savings, and it has motivated me to learn to be as resourceful as I can to help our family out.

Karri said...

Came across this article from Larry on this issue & thought you guys might be interested. It's written by Mitt Romney & he gives his own opinion as to what could be done to help fix the problems with the big 3.

Lorinda said...

Yes, I have thought a lot about the pros and cons also. It really bothers me about how inefficiently and irresponsibly the big 3 have run their businesses and I think in many ways they are out of touch with the needs of today's market. I wish they'd take some lessons on running a business from the Japanese. However, that being said, they are such a huge employer...its scarey to think what will occur if they go under. In a way, I think that Congress acted responsibly today by refusing to help them out unless they can present a reasonable plan.